Rheinmetall shares extended their winning streak to five sessions on Monday, rising 3.45% to €1,134.80, as a €3.9bn takeover in the defense sector and bullish signals from NATO’s leadership reignited investor appetite for military stocks. Yet the rally masks painful scars: the stock remains 43.58% below its 52-week high of €1,995 and 29.72% in the red since the start of the year, with a cancelled German frigate order still weighing on earnings expectations.
The immediate catalyst was Thales’ binding agreement to acquire Exail Technologies, the underwater drone specialist, for €134 per share — a 44% premium to the undisturbed price on June 25. The French electronics group will first purchase the Gorgé family’s 35.51% stake, then launch a mandatory offer for the remaining shares, valuing the target at roughly €3.9bn. The premium sent a signal across the sector: consolidation pays. Shares of Hensoldt, Renk and TKMS also rose on Monday as investors bet that other defense players could become targets or beneficiaries of similar revaluations.
Adding to the positive mood, NATO Secretary-General Mark Rutte noted ahead of the alliance’s summit in Ankara that European allies and Canada are already spending around 4% of GDP on defense. German Chancellor Friedrich Merz argued on Monday that Berlin’s military budget will double to €124bn within four years, with the government aiming for a 5% of GDP defense and infrastructure target by 2029. The draft federal budget allocates €109.7bn for the military in 2027, climbing to €183.7bn by 2030. In Ankara, European members and Canada are expected to pledge €70bn each for 2026 and 2027 in military aid to Ukraine, building on a €90bn EU loan approved in December 2025.
The rosy spending picture, however, clashes with recent industrial disappointments. Just weeks ago, Rheinmetall’s negotiations with the German government to build the F126 frigates collapsed, a blow that CEO Armin Papperger described as a “Schlag” for which the company was unprepared. Without compensation, the group could face revenue shortfalls of up to €300m in 2026. Papperger used the World Security Summit in Berlin to recall the Merkel era, when the defense industry was treated as a “Schmuddelkind” (black sheep), arguing that while the stigma has vanished, the path from pariah to backbone of security is anything but smooth.
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The share price has staged a remarkable recovery from its 52-week low of €902.50 on June 25, gaining 24.72% in less than two weeks, with a 15% jump in the past seven trading days alone. The Relative Strength Index now reads 50.0, squarely in neutral territory after a period of violent swings. But the equity still trades 5.63% below its 50-day moving average of €1,192.77 and a chasmic 26.68% below the 200-day average of €1,535.13. Thirty-day annualized volatility stands at 69.62%, underscoring that calm has yet to return.
The company’s current market capitalization of €50.89bn reflects investors’ readiness to look past near-term setbacks — provided the underlying demand story holds. Analysts forecast a dividend of €15.13 per share for the 2026 financial year, up from €11.50 last year, a sign that earnings expectations remain intact despite the frigate debacle.
Not everyone is convinced that the sector’s prospects depend solely on transatlantic orders. Former German ambassador Wolfgang Ischinger recently warned Europe against buying too many American weapons, urging instead that the continent invest in its own industrial base. Rheinmetall shareholders are betting exactly on that home-grown tailwind. Yet the F126 episode is a reminder that political promises and budget headlines do not automatically translate into signed contracts. Every parliamentary and budgetary decision that affects a major order will now face intense scrutiny, leaving the stock vulnerable to further shocks even as the longer-term narrative remains bullish.
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